New Trust Reporting Requirements

New Trust Reporting Requirements

New rules aimed at providing more transparency on beneficial ownership of assets now require that more trusts (and estates) file tax returns. These changes will catch many individuals and businesses that may not be aware of their trust-like relationships, exposing them to potential penalties and other consequences for non-compliance. The rules become effective in 2023, with a filing deadline of April 2, 2024.

Updated March 28, 2024: Bare trusts are exempt from trust reporting requirements for 2023: On March 28, 2024, the Canada Revenue Agency (“CRA”) announced that the CRA will not require bare trusts to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless the CRA makes a direct request for these filings. Further guidance is expected to be released over the coming months.

The new trust reporting requirements remain in effect for all other trusts. The filing deadline for affected trusts is April 2, 2024.

There are several reasons why an individual, business or organization may use a bare trust arrangement. Many parties involved in a bare trust arrangement may not realize that they are, much less that there may be a filing requirement with CRA. No lawyer may have ever been involved, and no written agreement may have ever been drafted. For more information please read this newsletter outlining the requirements.

Note Penalties:

Failure to make the required filings and disclosures on time attracts penalties of $25/day, to a maximum of $2,500, as well as further penalties on any unpaid taxes. New gross negligence penalties may also apply, being the greater of $2,500 and 5% of the highest total fair market value of the trust’s property at any time in the year.

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